On the Economics of Unemployment Insurance

Abstract

Unemployment insurance has two central functions. On the one hand, it contributes to a temporary securing of the income of people who have lost their jobs. It thus has a distributive-political dimension to which can be assigned a contribution to aggregate demand in times of economic downturn. On the other hand, unemployment insurance should facilitate an efficient job search and thus improve the allocation of labour in the labour market. Therein, incentive effects of wage-substitution benefits are of central importance. Both functions can contradict each other, as a relatively high wage substitution indeed largely secures the material status of the unemployed, but also prolongs the searching process and therefore unemployment. If therefore both functions of unemployment insurance are regarded as legitimate, but can also contradict each other, it must be asked how generous securing benefits should be.

Cite article

Walwei, U. (2009): Zur Ökonomie der Arbeitslosenversicherung. In: Aus Politik und Zeitgeschichte No. 27, p. 27-33.